In a previous blog post, we discussed the availability of virtual shareholder meetings (i.e., “virtual-only” and “hybrid” meetings) as a potential alternative to the traditional in-person meeting during the 2020 proxy season in light of the public health and safety crisis posed by the novel coronavirus (COVID-19) pandemic (we also discussed virtual annual meeting guidance provided by the SEC in a subsequent blog post). In response to COVID-19, states such as Connecticut, Georgia, New Jersey and New York have taken steps to remove barriers to virtual annual meetings under existing state law. Continue reading to learn more about steps these states are taking.
Continue Reading States Remove Barriers to Virtual Annual Meetings in Light of COVID-19 Pandemic
Senior Management and Boards in the Time of Social Distancing
The ongoing fallout from the pandemic associated with the novel coronavirus (COVID-19) continues to challenge companies, boards and management teams across all aspects of their business. In trying times like these, senior management team members are meeting regularly to discuss the impact of the virus on their business operations and formulate contingency plans that must be put into place to manage through this difficult environment.
Sometimes, management teams can be so focused on managing through a crisis that they fail to implement the protocols they are adopting for their broader associate base amongst themselves. For instance, many companies have recently implemented social distancing protocols among their employees including, remote working arrangements, limiting large meetings or non-essential face-to-face meetings. Meanwhile, groups of senior managers are meeting in-person in close contact with one another.Continue Reading Senior Management and Boards in the Time of Social Distancing
SEC Staff Provides Guidance for Conducting Virtual Meetings in Light of COVID-19 Pandemic
In a previous blog post, we discussed the availability of virtual shareholder meetings (i.e., “virtual-only” and “hybrid” meetings) as a potential alternative to the traditional in-person meeting during the 2020 proxy season in light of the emerging public health and safety crisis posed by the coronavirus pandemic (COVID-19). The Staff of the U.S. Securities and Exchange Commission’s Division of Corporation Finance and Division of Investment Management subsequently issued guidance for conducting virtual annual meetings under these unprecedented circumstances.
Post-Proxy Filing
The Staff confirmed that if a company has already mailed and filed its proxy materials, the company can notify shareholders of a change in the date, time or location of the annual meeting without amending its definitive proxy materials or mailing additional soliciting materials if the company issues a press release announcing the change, files the announcement as definitive additional soliciting material on EDGAR, and takes all reasonable steps necessary to inform other interested parties in the proxy solicitation process (e.g., any proxy service providers and applicable national securities exchanges) of the change. These actions should be taken promptly after the decision to hold a virtual meeting is made and, in any case, sufficiently in advance of the annual meeting. Therefore, companies that have already filed and mailed their definitive proxy materials would not need to mail additional soliciting materials (including new proxy cards) solely to switch to a “virtual” or “hybrid” meeting if they follow the steps described above for announcing a change in the meeting date, time, or location.Continue Reading SEC Staff Provides Guidance for Conducting Virtual Meetings in Light of COVID-19 Pandemic
COVID-19 Pandemic Causes Public Companies to Reevaluate Virtual Meetings
Across the globe, the coronavirus pandemic (COVID-19) is causing governments, companies, associations and colleges and universities to take unprecedented steps to address the spread and transmission of COVID-19. These steps include imposing restrictions on travel and public life; closing physical offices or campuses; canceling conferences, meetings and other scheduled group activities; restricting the size of gatherings; and encouraging or requiring employees and students to telecommute.
With increasing COVID-19 concerns in the United States and proxy season underway, public companies, including those that have already mailed proxy materials, may need to consider alternatives to conducting in-person shareholder meetings in light of the emerging public health crisis posed by the COVID-19 pandemic. Specifically, companies should assess whether or not a virtual meeting format is a viable alternative to the customary in-person meeting. Virtual meetings are generally divided into the following two categories:
- Virtual-only meetings conducted solely using remote communication.
- Hybrid meetings conducted in-person with concurrent participation by remote communication.
Continue Reading COVID-19 Pandemic Causes Public Companies to Reevaluate Virtual Meetings
Advance Notice Bylaw Provisions Upheld by Delaware Supreme Court
In a previous blog post, we discussed the Delaware Chancery Court’s decision in Saba Capital Master Fund, Ltd. v. Blackrock Credit Allocation Income Trust and its relevance to the interpretation of advance notice bylaw provisions. On appeal, the Delaware Supreme Court reversed the decision of the Chancery Court and strictly applied the deadlines set forth in the defendants’ unambiguous advance notice bylaw provisions.
Background of the Chancery Court Decision
In Saba, the defendants were two affiliated closed-end funds who sought to disqualify the director nominees of an activist shareholder because the activist shareholder did not strictly comply with the requirements of the advance notice provisions of the defendants’ bylaws. As allowed pursuant to the bylaws of the funds, the defendants had requested a response to a supplemental information request from the activist shareholder before a five-business day deadline.Continue Reading Advance Notice Bylaw Provisions Upheld by Delaware Supreme Court
Navigating the Maze: Which SEC Rules Apply to Your Non-GAAP Financial Measure Disclosures
The recent SEC enforcement action against ADT Inc. for its failure to comply with the SEC’s equal prominence requirements applicable to non-GAAP financial measures, as outlined in our recent blog post, is a clear reminder that public companies need to continue to be vigilant about the SEC’s non-GAAP financial measure rules. Also, the Staff has continued to focus on non-GAAP compliance in its comment letters, with non-GAAP financial measures being one of the leading areas of Staff comment over the last couple of years.
There are different layers of the SEC’s non-GAAP financial measures rules which apply to public companies in varying circumstances, depending on the nature of the public disclosure. Comprehensive knowledge regarding which level of the SEC’s non-GAAP financial measure rules applies to any particular disclosure is a key component when assessing legal considerations and risk in connection with the disclosure of non-GAAP financial measures.Continue Reading Navigating the Maze: Which SEC Rules Apply to Your Non-GAAP Financial Measure Disclosures
Revisiting Advance Notice Bylaw Provisions and Proxy Access
Advance Notice Bylaw Provisions
A recent Delaware case, Saba Capital Master Fund, Ltd. v. Blackrock Credit Allocation Income Trust, highlights the importance of advance notice bylaws and the careful application of the terms of such bylaws by public companies who may be subject to activist campaigns.
As backdrop, following Delaware cases in 2008 (Jana Master Fund Ltd. vs. CNET Networks, Inc. and Levitt Corp. vs. Office Depot, Inc.) which interpreted ambiguous advance notice bylaw provisions in favor of insurgent shareholders attempting to nominate their own slate of director nominees, a large number of public companies (particularly large-cap companies and public companies incorporated in Delaware) amended their advance notice bylaw provisions to eliminate perceived vulnerabilities in their advance notice bylaws and expand the information required to be provided by shareholder proponents (known as second generation advance notice bylaw provisions).
While the focus on advance notice bylaw provisions (including the law firm commentary on this subject) has waned over the last decade, advance notice bylaws remain an important aspect of a public company’s preparedness for shareholder activism.Continue Reading Revisiting Advance Notice Bylaw Provisions and Proxy Access
5 Key Takeaways from Our Public Company Financial Reporting Webinar
The Bass, Berry & Sims Corporate & Securities Practice Group recently hosted its first in a series of complimentary webinars exploring various public company-related securities law issues.
The first webinar, Key Insights into Financial Reporting Considerations: MD&A, Earnings Releases & Regulation FD, was held on July 18 and shared guidance on the preparation of the Management Discussion & Analysis (MD&A), key disclosure issues regarding earnings releases and calls, and important considerations for public companies under Regulation FD.Continue Reading 5 Key Takeaways from Our Public Company Financial Reporting Webinar
SEC Proposes Rule Amendments to Revise Financial Statement Requirements for Acquisitions and Dispositions
On May 3, 2019, the SEC proposed amendments to its rules and forms which would revise the disclosure requirements for financial statements relating to acquisitions and dispositions of businesses. We believe that most aspects of the proposed amendments, if adopted in current form, are thoughtful revisions to existing rules and will be beneficial to public companies, although we believe that a couple of aspects of the proposed amendments noted below may bear reconsideration by the SEC.
Key aspects of the proposed amendments include the following:
- Updating the significance tests by:
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- increasing the significance threshold for a disposed business (triggering the requirement to file pro forma financials) from 10% to 20% (mirroring the existing percentage threshold for acquired businesses).
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- revising the “income test” in the definition of “significant subsidiary” under Regulation S-X, particularly to include a revenue as well as (after-tax) income component to such test, which will eliminate anomalies existing under the current rules (which do not include a revenue component) when a registrant has net income close to zero and a filing may be triggered even where a registrant is much larger than an acquired or disposed company.
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- revising the “investment test” in the definition of “significant subsidiary” under Regulation S-X, including to provide that the purchase price in an acquisition or disposition (which is the numerator in such test) will be compared to the equity value of the registrant rather than (as under the current rules) to the book value of the total assets of the registrant.
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- expanding the use of pro forma financial information in measuring significance, which may provide added flexibility to registrants in determining significance under certain circumstances.
WEBINAR: Key Insights into Financial Reporting Considerations: MD&A, Earnings Releases & Regulation FD
Please join the Bass, Berry & Sims Corporate & Securities Practice Group as they launch a series of complimentary webinars exploring various public company-related securities law issues. These quarterly CLE programs will be an extension of our Securities Law Exchange Blog and will feature timely and practical guidance to SEC disclosure counsel on key topics of interest.
The first Securities Law Exchange webinar, hosted by Bass, Berry & Sims attorneys Kevin Douglas and Scott Bell on July 18, 2019 from 12:00 p.m. – 1:00 p.m. CST, will highlight key financial reporting considerations for public companies. The discussion will include practical advice regarding the preparation of the Management Discussion & Analysis (MD&A), key disclosure issues regarding earnings release presentations, and important considerations for public companies under Regulation FD.Continue Reading WEBINAR: Key Insights into Financial Reporting Considerations: MD&A, Earnings Releases & Regulation FD